Given Strategy's (formerly MicroStrategy) success as a Bitcoin (BTC +0.03%) treasury company, many other companies are now following in its footsteps.
For those unaware, Strategy, formerly a business intelligence company founded by Michael Saylor, who remains the company's executive chairman, began using corporate capital to buy Bitcoin in 2020. The stock has rocketed since then, and eventually, Saylor and Strategy gained enough credibility to tap the capital markets for funding that it could then use to buy Bitcoin. This essentially made Strategy a leveraged play on Bitcoin.
Recently, Bitmine Immersion Companies (BMNR 5.86%), a Bitcoin mining company, just named the prolific Wall Street strategist Tom Lee of Fundstrat as its chairman. The company also announced a $250 million private placement, which it will use to purchase Ethereum (ETH 0.31%), the world's second-largest cryptocurrency by market value.
Is it Ethereum's time?
Since Donald Trump won the presidential election last November, several of the largest cryptocurrencies, including Bitcoin and XRP, have done quite well. Ethereum, not so much.
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It's hard to pinpoint exactly why Ethereum has not shared in the gains, but perhaps a better explanation is that Bitcoin and XRP have simply enjoyed more catalysts. Bitcoin has benefited from being viewed as a form of digital gold, while XRP has surged as the Securities and Exchange Commission (SEC) ended its long-standing lawsuit against Ripple, the company behind XRP, and due to the possible launch of spot-XRP exchange-traded funds (ETFs).
Image source: Getty Images.
The underperformance has opened the door for investors who feel like Ethereum is being unjustly left behind, Lee being one of them. Not only has Lee become a well-known contributor on CNBC, but he's made some prescient calls in recent years on the price of the broader market, as well as Bitcoin. Lee is typically bullish and nailed bull market calls in 2023 and 2024. Lee has previously said he thinks the broader benchmark S&P 500 could hit 15,000 by 2030 (the index now trades at about 6,200). He's also quite bullish on Ethereum as the crypto and financial sectors become more integrated, as he recently said on CNBC:
The financial services industry and crypto are converging and it really started with stablecoins, which is the ChatGPT of crypto because it's viral adoption by consumers, business banks and now even Visa. Underneath the stablecoin industry is Ethereum -- that is really the backbone and architecture of stablecoins so it's important to create a project that accumulates Ethereum to essentially protect and have some influence on the network.
As a reminder, stablecoins are digital assets pegged to a currency or commodity. They are intended to take advantage of the technology behind the blockchain while leaving behind the volatility associated with cryptocurrencies. Many believe they could be extremely helpful for those without access to the banking system because you can use them to transfer money anywhere with internet access.
Lee thinks banks could use Ethereum's proof-of-stake (PoS) consensus mechanism to secure stablecoin issuances in the future. PoS involves selecting validators based on the number of Ether tokens users have to confirm transactions and mint new blocks.
In a way, Ethereum is already a core part of the plumbing of the burgeoning stablecoin network. That's because it's one of the most commonly used blockchain networks in the U.S. Circle's USDC, the second-largest stablecoin, with a market cap of about $61 billion, is an ERC-20 token, meaning it was initially created on Ethereum's blockchain. Lee also noted that more than 30% of fees generated on Ethereum are from stablecoins.
CRYPTO: ETH
Key Data Points
Is Ethereum about to go on a Bitcoin-like run?
Part of Lee and Bitmine's bet on Ethereum has to do with the stablecoin market. U.S. Treasury Secretary Scott Bessent has already said he thinks stablecoins could go from a $250 billion market today to $2 trillion. If that happens, Lee thinks Ethereum's network is likely to benefit immensely because of all the network fees, which will perhaps make Ethereum more ubiquitous.
Interestingly, since the news of Tom Lee joining as chairman and the $250 million private placement, Bitmine's stock has soared more than 1,300% (as of July 1), although Ethereum's price hasn't moved much. Remember, cryptocurrencies are difficult to value because they don't generate earnings like a company.
I've been surprised that Ethereum's price has stayed so muted while Bitcoin has soared. As a cryptocurrency, Ethereum certainly has one of the best use cases due to all of the activity on its network from decentralized applications and its proof-of-staking concept, so I think it could be due for a run at some point.
